Stocks Rebound on Renewed Bailout Hopes

Updated from 3:38 p.m. EDT

Stocks on Wall Street finished at session highs Friday as investors continued to weigh the possibility of a financial-sector bailout and the implications of JPMorgan Chase's (JPM Quote) acquisition of Washington Mutual (WM Quote).

The Dow Jones Industrial Average, down more than 100 points at the outset, went positive and finished higher by 127.07 points, or 1.1%, at 11,143.13. The S&P 500 also rebounded to finish up 4.09 points, or 0.3%, at 1213.27. The Nasdaq Composite was the weakest performer, falling 3.23 points, or 0.2%, to 2183.34.

Somewhat encouraging for the market were comments from President Bush, who said that elected officials would find common ground and arrange a rescue for the financial system. "We will rise to the occasion, where Republicans and Democrats will come together and pass a substantial rescue plan," he said.

On Thursday, the three major indices rallied sharply on the expectation that Congress would quickly pass Treasury Secretary Henry Paulson's $700 billion bailout plan to purchase troubled assets from the financials.

After Thursday's session ended, however, discussions on Capitol Hill about the bailout hit a rough patch as an alternative proposal by Republicans tabled efforts to pass the Paulson plan.

News of the breakdown in negotiations coincided with word that federal regulators had seized Washington Mutual and arranged the sale of the assets, deposits and some liabilities of the failed bank to JPMorgan Chase.

The Office of Thrift Supervision and the Federal Deposit Insurance Corporation facilitated the deal. Shares of WaMu plummeted 90% to 16 cents.